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Most nations in the Asia-Pacific region are slowly recovering from the aftermath of the global financial crisis, while some, like China and India, were never quite affected by it to begin with.
How has consumer behaviour shifted since the economic meltdown? Have they become more cautious and set to remain so for a long time to come? Or is it all nothing but a distant memory now?
While recession-hit consumers in the United States and Europe are scaling back on showy purchases, Chinese consumers are flocking to domestic retailers, spurred by government stimulus measures such as rebates on home appliances and tax cuts for low-emission cars. On a recent shopping spree, He Yi, a 25-year-old fashion magazine editor, spent half of her monthly salary buying brand-name clothing, accessories and skin care products in just one morning.
Many well-heeled Chinese shoppers like He, who lives with her parents in Beijing and has a small car in her garage, are spending freely despite the uncertain global economic situation. “Like many of my friends, my job is stable and not affected by the financial crisis,” she said. “The big-name brands have not just offered some unusual promotions during the sluggish economy, but also launched new lines especially tailored for middle-income and fashion-loving consumers.” For He and many others, the financial crisis has had the advantage of making high-end brands more affordable and available.
On the other side of the mirror, Japanese consumers, who have long been celebrated for their willingness to pay for quality and convenience and their disinterest in cheaper products, are learning the virtues of thrift. They are now flocking to discount and online retailers with sales of relatively affordable private-label foods increasing dramatically.
Workers are even packing their own lunches, sparking the nickname “bento-danshi”, or lunch-box man. This fundamental shift in the attitudes and behaviour of Japanese consumers seems likely to persist, irrespective of any economic recovery.
It seems that Japanese consumers have forgotten about designer brands and quirky gadgets amid the global financial crisis, with low-priced fashions and green products scoring big in Japan in 2009, according to the advertising firm Dentsu Inc’s latest Hit Product Recognition Survey released in March.
Hybrid vehicles and flu masks were very popular, as were inexpensive fashions and cheaper store-brand products as companies targeted thrifty customers with affordable items.
Japanese consumers remain reluctant to open their wallets even as the economy has emerged from recession, with outlet malls becoming increasingly popular. One shopper said, “There are discount items at outlet shops. There are also the latest items sold at the regular price, so we can choose from both. That is what I like about it.”
With this new shift in consumer attitude, 24/7 convenience stores, called “combinis” are in trouble. What used to be a mainstay in consumers’ buying culture in the country is now more fragile, with sales forecasted to grow just 1.5% this year compared to 3.5% the year before, according to data from Euromonitor International, while they have declined for the sixth month in a row, according to the Japanese Franchise Association.
Many consumers, like 70-year old Rieko Emoto, have opted to shop at discount food supermarkets instead of convenience stores. “I usually visit the nearest supermarket because prices are reasonable,” Emoto said. On average, supermarket food prices are about 20% cheaper than convenience store prices.
In New Zealand, consumers are spending more carefully too. Managing director John Milford of Kirkcaldie & Stains, a department store in New Zealand, said: “My view is the next kick in confidence in retail sales will probably not be until the Rugby World Cup in 2011.
People have readjusted their lifestyles and I’m not sure people will be rushing to change that back.” Rena Kohere, retail manager of fashion store Starfish, echoed the sentiment: “Shoppers have become a lot more cautious during the recession. I don’t know if those attitudes will change. People have got used to thinking about their purchases and planning more.”
Source: Euromonitor International from the International Labour OrganisationNote: Data for 2010 is forecast.
Saving up for their children’s education and marriages is of utmost importance in many cultures in the region. “You cannot subsidise a good education or a lavish marriage, but you can certainly cut down on nice clothes or the size of your car,” said Cai Yongxin, a 59-year old businessman in Taipei who wants nothing but the best for his two teenage daughters.
The recession may have cut into the incomes of most local households, but more than half of Taiwan’s families are still spending as much on their children as before the economic downturn, a survey released in the last quarter of 2009 by online job bank 1111 has found. Among those respondents whose take-home pay had fallen, 57% however, said they were spending as much on their children, including for their education, as when they enjoyed higher incomes.
These parents explained that they believe their children’s future is more important than money and that they would rather cut other family spending than sums spent on their offspring.
In a survey published early this year by The Hindu newspaper on spending habits, parents in India may be cutting back on holidays and spending on the home but pocket money for kids was one area that is not seeing any cutbacks. The survey interviewed 3,431 children belonging to mid- to high-income families during July and August 2009.
The survey discovered that not only did 40% of parents give pocket money to their children but that the amount given had increased by 36% on 2008. Most parents said the economy may have slowed with less company perks coming their way, but spending on toys, games and clothes for their children remained unaffected.
Source: Euromonitor International from trade sources/national statistics Note: Market sizes based on retail value RSP.
According to a study published this year in the Australian And New Zealand Journal Of Public Health, the prices of fruit and vegetables have jumped almost 50% in the last six years while the price of junk food and soft drinks hardly shifted. Naturally, consumers are going for the less healthy option both during and after the recession.
Retail sales figures released in February 2010 by the Australian Bureau of Statistics show consumers cajoled themselves through the economic uncertainty of last year by spending up on takeaway food, bottle shop liquor, pharmaceuticals and cosmetics.
To compensate, consumers spent considerably less on newspapers and books, pared back spending on sporting goods, toys and games, and also cut back the proportion of money spent on electrical goods.
The figures, broken down by the CommSec economics team, show that, as a nation, people are more likely to be found munching on takeaways in front of television cookery shows than in the kitchen whipping up meals from fresh ingredients. ”It’s quite clear that we got ourselves through this recession by binging on drinks, drugs and burgers,” said CommSec chief economist Craig James.
Australian National Retailers Association CEO, Margy Osmond, added: “The constant talk of rising unemployment and economic doom and gloom, certainly has its effects on people’s morale, and treats like chocolates help provide that much needed boost.”
Surging property prices post-recession appear to be driving a spending spree in Australia, with home owners taking out bigger mortgages to help fund the purchase of big-ticket items, from new cars to holidays. While many struggle to get a foothold in the housing market, home owners buoyed by double-digit rises in property prices are increasingly using their homes as ATMs.
It has rekindled memories of the early 1990s when banks encouraged home owners to borrow for a holiday or new car and add it to their mortgage. Before a 25-basis point rise in interest rates in early April, Australia Reserve Bank governor Glenn Stevens took the unusual step of appearing on breakfast television to say that property prices were ”getting quite high” and warn of the dangers of people taking on too much mortgage debt.
Meanwhile, the strong Australian dollar is also encouraging Australians to travel overseas in record numbers. JPMorgan banking analyst Scott Manning, said: ”If mortgage rates approached their pre-financial crisis highs then first home owners will be committing about half of their post-tax income to interest servicing.”
In a nationwide poll conducted by matchmaking firm Duo and Choi and Seoul National University in October/November 2009, 80.9% of men and 64.5% of women stated they would like a double-income family.
Duo CEO Kim Hye-jung said: “Those who did not think about continuing to work after marriage changed their minds as the economic situation worsened, but in doing so, they tend to forget about some of the very important realistic issues of married life. They need to think outside of stereotypical gender roles and treat their spouse as an equal partner.”
In Australia, consumers have had the same sentiments since the recession. According to The National Institute of Labour Studies, more women (59%) than men (41%) are completing university degrees in the country. Sonya Petkovic, 30, said being a full-time mum to two-year old daughter Tiana was not realistic. “My husband and I were looking for a home for about two years and we didn’t want to buy a flat,” she said.
“So it takes two incomes to really afford a mortgage with interest rates climbing since the recovery of the economy. It’s inevitable that women will get back to work.”
Source: Euromonitor International from trade sources/national statistics Note: Data for 2010 is forecast.
Still reeling from the recent global financial crisis, consumers across the region will remain more resourceful and strategic when planning their purchases for meals, their wardrobe, their homes and personal care.
Low prices and sale items continue to dominate shopper decisions at stores, and consumers are increasingly collaborating with friends, family and neighbours to share information, split costs and divide bulk goods purchased at a lower cost.
Thom Blischok, President of ICI Consulting and Innovation firm, said, “Financial pressures have taught shoppers to give up favourite brands, buy smaller quantities of preferred items or postpone non-essential purchases for entertainment in order to save money for their most important needs.”
However, Chinese consumers are likely to continue to spend up, regardless of the global economic situation. The World Bank China Quarterly Review late last year pointed out that continued increases in government transfers are likely to support income growth among the Chinese population in 2010, including a 10% rise in pension commitments. Moreover, in much of 2009, households benefited from negative inflation, which boosted their purchasing power.